Closing the File Cabinet

An integrated financial management system can enable a mechanical contractor to streamline operations and monitor its bottom line. J.F. Ahern Co. is one of the leading mechanical and fire protection contractors in the U.S. with more than 1,000 employees and revenues of $194 million in 2007. The company is projecting strong growth in revenues this year. With headquarters in Fond du Lac, Wis., the company

MICHELLE COLYAR AND STEVEN GROSS Special to CONTRACTOR | Jul 01, 2008

An integrated financial management system can enable a mechanical contractor to streamline operations and monitor its bottom line.

<strong>J.F. Ahern bases its job profit calculations on labor and not materials.</strong>

J.F. Ahern Co. is one of the leading mechanical and fire protection contractors in the U.S. with more than 1,000 employees and revenues of $194 million in 2007. The company is projecting strong growth in revenues this year. With headquarters in Fond du Lac, Wis., the company has 13 offices throughout Wisconsin, Minnesota, Michigan, Illinois, Indiana, Iowa, Nebraska and Missouri. The 128-year-old company has approximately 500-600 major active jobs throughout the country at any one time.

Since 1992, J.F. Ahern has used the Computer Guidance financial system designed for contractors, and in 2005 upgraded to the eCMS solution. The company uses the system's comprehensive accounting, job cost, and imaging and workflow applications. Users include the company's staff of 18 in accounting and administration, as well as more than 200 administrative and operations staff in 13 offices, including project managers, who have access to real-time information using a secure Web browser. The system runs on IBM iSeries hardware.

At first, the company tried to implement the package's data imaging and workflow upgrade, but like any computer upgrade, the process presented challenges — even for the company's seasoned IT staff of 18. So the company contracted for the vendor's systems specialist to come to its headquarters to manage the implementation. Within two days, the accounts payable staff were up and running with the new data imaging and workflow system. Within one day, the staff were totally caught up on their work. It is important for a contractor to make the investment in any training that is offered by the system vendor, as well as ongoing opportunities to network with other users, as J.F. Ahern has done.

Contractors should also understand that when they select a financial system that is not their own “home-grown” system, it will do 80% to 90% of what they want it to do. Like any system on the market, a financial system is designed to meet the needs of a wide range of contractors' needs.

J.F. Ahern elected to continue using its home-grown project management system, which had been in use for more than 13 years. Although the company's project management system does use financial data from the software package to generate the reports that project managers have grown accustomed to, conversion to “project collaborator” software may be an option for the future. Use of an integrated solution avoids the inevitable re-keying and verification associated with data entry into two separate systems.

Going online

One of the biggest obstacles to efficiency had been the amount of time and effort required to manually process more than 68,000 invoices a year. Each invoice needed to be copied and mailed to the project manager for approval while the original was filed in the accounting department. In addition, when a call came into the department from a project manager, subcontractor, or vendor, staff often needed to pull the invoice from a file cabinet or a storage room and then copy and mail or fax it to the requester. The new software includes an imaging and workflow component.

The controller's first priority was to streamline the existing paper-intensive invoice processes. The existing manual steps were used to process and approve approximately 5,000 to 6,000 invoices each month. Invoices are now being scanned into the new system using a multifunction copier. Using the financial system's workflow component, documents can be electronically routed to project managers for approval and then routed back to accounts payable for payment. Using a Web browser and the appropriate security to access the system, project managers retrieve, approve and forward their documents without calling accounts payable staff. Invoices are linked to detailed transactions, allowing users to pull up associated purchase orders. If invoices are not approved in a timely way, automatic e-mail reminder notices can be sent to the approver, and “escalation notices” to their managers.

After the invoices are electronically routed back to the accounts payable staff for processing and payment, the staff can process invoices with the invoice on one screen and the accounts payable data on another screen. As a result, the accounting department has saved one half of a full-time staff member. Also, the controller no longer has to pull invoices for the auditors each year, saving at least a day's work.

With the successes achieved in accounts payable, J. F. Ahern pushed the electronic envelope even further, scanning approximately 500 accounts receivable checks and attachments per week. This process is a big help to the five staff members who handle approximately 3,000 collection calls each month. The manual process had been inefficient. If a customer said, “I paid that on March 31 on check number 1234,” the staff member would have to find that deposit in the system, go to a box in the vault, go through 100 to 200 checks looking for the stub, and then play phone tag with the customer. Now the staff person can pull up the images of the invoice and check online to determine the source of the discrepancy, all while still on the phone with the customer. The new process is assisting with more accurate cash-flow projections. The company has begun scanning packing slips, field purchase orders (manual P.O.s are used in the field for purchases of less than $500) and other documents into the system.

Tracking job costs

J.F. Ahern bases its job profit calculation on percent complete, that is, on labor not materials. The company takes a conservative, detailed view of its bottom line — if a job is underperforming its estimate, it is immediately written down. The job cost component of the financial system enables the company to track costs and profits on thousands of jobs to the nth detail. The system's job cost component is updated daily if a new job comes in, or if there are any changes on an active job. The controller uses the job cost component to run monthly financials. When the company closes out on the 10th of every month, the accounting department has preliminary financials posted within three to four hours. The entire package, which comprises approximately 30 reports and a detailed overhead analysis, is completed and posted within two working days. The company's year-end financials are completed just as quickly — accounting staff come in to the head office one Saturday, and the year-end financials have been posted by the start of business on Monday.

Make your own reports

The “business objects” component of the system allows a computer-savvy user to easily design reports and inquiries from financial data, whether it is in the accounting database or any other database, such as a spreadsheet or even a home-grown system. Using business objects, the controller has created hundreds of reports that have increased the department's productivity.

Here's a recent example. The company uses a positive pay system with its bank to ensure against check fraud. Each day, the accounting department sends the bank a file that lists each authorized check by number, date and amount. If a check is presented to the bank that is not on that list, the bank notifies J.F. Ahern. Using the software's business objects component, in about 10 minutes the controller was able to create a report into which staff can download the required data. The bank tested it and it is ready to run. Moreover, the controller did not have to ask the busy IT staff to create the report. Like other components of the integrated system, business objects empower individual users. In today's business environment, a contractor simply cannot afford the time and overhead associated with doing business using a hodgepodge of manual processes and individual financial applications — especially when the mechanics of efficiency and profitability can be achieved using a cost-effective integrated financial solution.